Toyota Increases Proposal to $30 Billion Resolving the Shareholder Standoff for TICO
Toyota increases its TICO bid, obtaining Elliott’s consent to tender shares, signifying an important achievement in corporate governance.
Toyota Motor Corporation has increased its offer price for supplier Toyota Industries Corporation to 20,600 yen ($132) per share, valuing the bid at approximately $30 billion and resolving a months-long standoff with activist investor Elliott Investment Management, which had advocated for a higher price.
Elliott announced that it had consented to tender its shares in the forklift manufacturer, referred to as TICO, describing the increased offer as a “better outcome” for minority shareholders. The current price stands almost 10% higher than Toyota’s earlier bid of 18,800 yen, following an initial offer in June of 16,300 yen, both of which Elliott deemed insufficient.
The fund, together with other minority shareholders, contended that the previous bids did not accurately reflect TICO’s value. Elliott had earlier stated that the shares held a value exceeding 26,000 yen each.
“The confrontation between Paul Singer’s fund – a leading figure among shareholder activists – and Toyota, the foremost automaker globally, has garnered significant attention as a benchmark for Japan’s efforts to enhance corporate governance,” analysts noted.
Travis Lundy of Quiddity Advisors, who publishes on the Smartkarma platform, remarked that Elliott’s decision to tender essentially renders the bid a “done deal,” although he described the increased price as a “disappointing outcome.” He stated, “At no point did Toyota ever acknowledge that the structure was designed in a manner that could have been improved.”
TICO will divest its interests in other Toyota companies as part of the agreement, responding to concerns regarding cross-shareholding practices that have faced criticism for shielding management from investor scrutiny.
“Cross-shareholdings have long been an unresolved issue within the Toyota Group, and this is an extremely significant development for the market,” Kenta Kon, regarded as the architect of the buyout, stated at a briefing.
The Asian Corporate Governance Association, along with approximately two dozen investors, had earlier expressed concerns regarding the buyout, highlighting insufficient financial disclosure and contending that Toyota group companies ought not to be categorized as minority shareholders, thereby reducing the voting threshold necessary to finalize the deal.
Toyota has consistently dismissed such criticism, asserting that it has implemented various measures to guarantee the transparency of the bid, which includes consulting outside directors and securing three fairness opinions.
Established in 1926 as Toyoda Automatic Loom Works, TICO subsequently introduced an automobile division, which was spun off as Toyota Motor in 1937. Toyota has expressed its intention to take TICO private in order to alleviate short-term profit pressures as the group shifts its focus towards connected cars and advanced software.
The automaker stated that its most recent offer price depends on securing loan guarantees from its banks.
